Commercial mortgage debt hits $3.11 trillion

Commercial mortgage debt rose across all major investor classes to $3.11 trillion this
past third quarter, the Mortgage Bankers Association reported. Total debt outstanding
jumped by $45.4 billion, or 1.5 percent, compared to second-quarter 2017, the trade
group said. Notably, debt held in commercial mortgage-backed securities (CMBS) saw
its largest increase since late 2007. CMBS debt has generally declined since 2008.

Hotels continue strong run

An improving economy is helping to bolster the hotel sector. The annual average
hotel-occupancy rate was forecast to hit a record level of 65. 9 percent for 2017 and
remain at that mark through the decade’s end, CBRE Hotels reported. Several factors,
including increased supply, are making it difficult to raise room rates and increase
profit margins, however, CBRE said. For 2017, CBRE forecasted an annual average daily
rate (ADR) increase of 2.2 percent to be followed by a 2.5 percent bump in 2018.

These are both below the long-run average annual ADR growth rate of 3.1 percent.

Meanwhile, compensation costs at hotels have been rising by more than 4 percent
annually.

Moody’s: Commercial market remains stable

Commercial property fundamentals, such as occupancy rates and rents, were generally
stable through the first half of 2017. The pace of new construction, however, has been
picking up and is expected to slow growth in occupancy rates and rents, according to
Moody’s Investors Service. The apartment, office and hotel sectors were in the late stages
of the real estate cycle, but construction of new properties is continuing in these sectors.

The retail and industrial sectors remained in the mid-recovery stage, Moody’s said.

Commercial asset prices move up

Fewer commercial properties changed hands in 2017, but sales prices continued to move
upward through this past fall. As of this past October, the aggregate sales price of
significant U.S. commercial and multifamily assets rose by 1.2 percent over the prior
month’s level, and was up 8. 4 percent year over year, according to Real Capital
Analytics’ all-property index. The gain came despite a 23 percent year-over-year drop
in sales-transaction volume as of this past October, the sharpest decline since January

2017 for properties sold for $2.5 million or more, RCA reported.

Commercial loan delinquencies hit new lows

The delinquency rates for commercial and multifamily loans held near historic lows
in the third quarter of 2017, the Mortgage Bankers Association reported. Delinquency
rates for loans held in bank portfolios hit a 24-year low this past third quarter, declining
to 0.52 percent, down two basis points from the prior quarter. The delinquency rate
for loans underpinning commercial mortgage-backed securities fell 23 basis points,
to 4. 61 percent, over the same period. The delinquency rates for loans purchased by
Fannie Mae and Freddie Mac, as well as loans held in life insurance portfolios, were
near zero. n

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In BriefNews RoundupBy Victor Whitman$21.6B

The delinquent unpaid balance of loansunderpinning commercial mortgage-backed securities as of this past October,a 20-month low

Source: Morningstar Credit Ratings

The sales-transaction volume of commercialassets over the 12 months through October2017, down 4. 3 percent year over year